The emperor’s new economics: how neoliberalism lets coal miners get away with making wild, unsupported claims about economic benefits

‘Neoliberalism’ is one of those terms rarely used in a complimentary sense. In fact being described as a ‘neoliberalist’ tends to imply that your moral standing is only marginally above that of someone who steals from widows and orphans. Neoliberalism took a chokehold on New Zealand economic policy back in the 1980s and 90s, but does the emperor really have any clothes?

A central tenet of neoliberal dogma is that business should be allowed to do its own thing while the government stays out of the way. If markets don’t exist in such areas as land, water, or environmental pollution, then they should be created. Controls on working conditions and foreign investments should be relaxed. State assets should be sold off – privatisation and private property rights rule.

The 1991 Resource Management Act (RMA) attempted to set out how we should manage our environment in a sustainable way when making decisions about the use of resources. Decision-making processes, however, may give undue weight to claims that economic gains will compensate for any environmental damage caused.

In order for the best possible decisions to be made, it’s vital that councils and courts should have access to the best possible information. This doesn’t always happen. When Mokau South Resources (MSR) applied for consents to mine the Panirau Plateau, the supporting information was best described as scanty. For example, MSR’s consultant ecologist carried out a one-day field study but didn’t actually visit the proposed mine site. To its credit, the Waikato Regional Council didn’t let MSR get away with its shoddy application, which Tim Jones of CANA had compared unfavourably to that which might be produced by monkeys under zero-hours contracts with bananas banned from the workplace.

Stevenson Mining’s application to develop an opencast coal mine at Te Kuha on the West Coast has, on the other hand, been accompanied by pages and pages of information. Reports prepared by consultants for Stevenson, for the councils, for the Department of Conservation and for environmental NGOs all came to the same conclusion: Te Kuha has extremely high conservation and landscape values which will be irreversibly damaged if mining goes ahead.

The crux of the applicant’s case must be that the benefits resulting from mining Te Kuha would outweigh the environmental destruction. So what is the economic rationale of the proposal? Whereas the scientific aspects of the applicant’s case are backed up with actual evidence, we are asked to accept the economic claims on trust. The Council Planning Officers’ report simply states, “We acknowledge that the proposal will have clear positive economic benefits with respect to providing for employment and wider economic benefits to the district and region.” Well, that’s nice.

DOC and the Ministry of Business, Innovation and Employment (MBIE) struck up a cosy arrangement in which they presented a joint submission on Te Kuha. MBIE consultants assessed the Net Present Value (NPV) of the project as $34–36m, but there is no reference to the identity of these consultants or to the evidence on which their opinions are based.

For those of us who don’t have a background in economics it’s easy to feel threatened by the unfamiliar language. (NPV? Go google.) But in order to challenge the promises of untold jobs and wealth, you often don’t need any specialist knowledge at all.

Let’s take a look at just a few of Stevenson’s claims:

“It can be assumed that the costs and benefits have been responsibly and properly analysed and that from the viewpoint of those with money at risk, the expected financial benefits exceed the expected costs.”Who carried out this analysis? What were their findings based on? Has anyone told them about Mt Davy, Spring Creek, Escarpment, Roa – just some of the West Coast mines which have spectacularly failed to achieve the financial benefits claimed by their owners?

“Preliminary tests indicate that there could be three products from Te Kuha, including a premium one that will attract higher prices.”What proportion of the coal will be of this grade? What will the price differential be?

“Te Kuha coal will be used in specialist applications such as for making carbon fibre, activated carbon and pharmaceuticals.”Which of these processes are currently carried out in New Zealand? What discussions have been held with overseas manufacturers who might buy Te Kuha coal? Who are the competitors in this market?

“Te Kuha will generate 58 new mining jobs.”Based on what evidence? How many jobs will be for current West Coast residents as opposed to transients?

“The value of coal produced will average $57m a year.”What evidence does the company have that the recent wild swings in the price of coking coal will stabilise at a profitable level? What is this likely to be?

And one other question: If more than a century and a half of coal mining has failed to bring sustained prosperity to the West Coast, what is the factual basis for claiming that opening yet another coal mine will solve the area’s problems?

Some hard choices have to be made about our use of natural resources. But decision-makers can be hoodwinked into believing that they should accept without question any proposal that includes the words ‘jobs’, ‘profit’ or ‘tax revenue’. It’s time to insist that the same scrutiny is given to economic arguments as to environmental ones. It’s time to rip away the cloak of ‘commercial sensitivity’ that can be allowed to shield the emperor’s nakedness. And it’s time to listen when voices cry out, “But he has nothing on at all!”